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Other people's money: international banking is still going strong in South Florida despite challenges from bank regulators and patrons made anxious by tough efforts to thwart terrorism

South Florida CEO, March, 2005 by Mike Seemuth

Miami-based bank executive Seno Bril was happy to have $700 million of additional assets to manage for about 900 wealthy Latin Americans. The French bank he works for, BNP Paribas, bought the accounts from Banque Sudameris, the Miami subsidiary of an Italian bank. BNP Paribas agreed to pay as much as $14 million for custody, depending on how many old Banque Sudameris accounts it retains.

But Bril tempered his celebration of the new business with routine security checks. When his bank acquires the accounts of another, he sees not only new customers but also new regulatory risks--not to mention personal ones. His failure to detect money laundering by a BNP client, or by associates of a client, could break his career.

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"If my financials are below budget, it's bad. If we have a serious regulatory problem, I lose my job. And I'm sure that is true of my colleagues in Miami," says Bril, general manager of the BNP Paribas agency in Miami and chairman of the bank's US-based securities broker-dealer, BNP Paribas Investment Services. "We have to know the friends of our clients--and the friends of the friends of our clients."

Long a popular landing strip for flight capital from Latin America, Miami continues to attract wealthy Latin Americans whose net worth is threatened by devaluation, inflation, crime, political instability and other risks in their home countries. Now, however, some well-heeled foreigners who park money in Miami may be looking to move their accounts to other countries because of stepped-up security by banks and regulators here.

The federal government has essentially deputized international banks in the war on terror. And international bankers such as Seno Bril find themselves on the financial front line, as they have since the 1970s when South Florida emerged as a significant international banking center.

The basics of international banking in South Florida haven't changed much in recent years. Wealthy clients still enjoy the one-on-one attention of investment advisers working like waiters, offering a menu of items that range from checking accounts and bank certificates of deposit to stocks, mutual funds, real estate partnerships and hedge funds. And multinational business owners still have plenty of trade finance specialists to call on for letters of credit or other means of moving money to make imports and exports happen.

Lending by international banks with a local presence tumbled in the aftermath of the Sept. 11 terrorist attacks in the US, and has not recovered to pre-2001 levels. From September 2001 to September 2002, the outstanding loans of Florida's state-chartered foreign bank agencies and federally chartered international bank branches plunged to $4.4 billion from $11.5 billion--a 62 percent decline. Their combined portfolio of trade financing arrangements and other loans bottomed out lower before recovering to $3.7 billion as of Sept. 30, 2004.

Deposits went in the other direction, expanding by 18 percent during the first 12 months after the Sept. 11 attacks, to $13.3 billion. They have grown another $1 billion since then, weighing in at $14.3 billion as of Sept. 30, 2004.

Threats To Stability

Much of that deposit base may now be up for grabs. Foreign nationals face increased security and travel restrictions, and some have voiced fears that they may not be able to access their investments or money in the US in light of the increased vigilance, experts say.

That threatens the wealth management side of international banking, as do some US banking regulations that have grown out of the anti-terrorism-inspired USA Patriot Act of 2001 and its sweeping amendments to a variety of federal laws.

The Patriot Act builds dramatically on past efforts to discourage criminals from laundering the proceeds of illegal transactions through legal ones. The early phase of the US-declared war on drugs during the 1980s triggered "know your customer" precautions against money laundering in Miami before the practice became a common financial tactic to combat narcotics traffickers.

"I guess, in Miami, we have been sort of the guinea pigs with the 'know your customer' regulations," says David Konfino, president of the Miami-based international business unit of Montgomery, Ala.-based Regions Bank.

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Now the federal government wants more. It is demanding that international bankers not only know their customers and their customers' associates, but also monitor their money movements, and vouch for the veracity of their monitoring systems, or face civil penalties for deficient detection of money laundering.

The Patriot Act is "the broadest federal law since the New Deal," says Charles Intriago, publisher of the Miami-based newsletter Money Laundering Alert.

"There should be a slackening of funds flowing out of Latin America for safety and security reasons. I just don't see the growth in that business that we have seen in recent years," Konfino says.

Business Services Industry

Other people's money: international banking is still going strong in South Florida despite challenges from bank regulators and patrons made anxious by tough efforts to thwart terrorism

South Florida CEO, March, 2005 by Mike Seemuth

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